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Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

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Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

Last updated: June 27 2012
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  • Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

    According to latest order by the HC, service tax has been levied at 2.5% from July 2010. It has also been mentioned that Vat is 1% again from 2010. So those who have bought flats before that should be safe. Am right?

    This is my understanding and I am no legal eagle

    is there any lawyer who can clarify please?In the event of any arm twisting by our builders we need to know the legal facts so that we are in a position to place it before them in case they make unreasonable demands. My flat has been purchased and registered by March 2010. But possession is not yet given.





    Last edited January 23 2012, 04:24 PM.
  • #2

    #2

    Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

    Originally posted by Mayank G View Post
    According to latest order by the HC, service tax has been levied at 2.5% from July 2010. It has also been mentioned that Vat is 1% again from 2010. So those who have bought flats before that should be safe. Am right?

    This is my understanding and I am no legal eagle

    is there any lawyer who can clarify please?In the event of any arm twisting by our builders we need to know the legal facts so that we are in a position to place it before them in case they make unreasonable demands. My flat has been purchased and registered by March 2010. But possession is not yet given.






    As far as I know :

    -- Whatever payments you make to builder (for Under Construction
    flats) after July 2010 is liable for Service Tax.

    -- All payment made before July 2010 are exempted.

    -- Example: if Flat cost is 1Cr and you paid 80Lacs before July then 80
    Lacs is exempted from service tax. You have to pay Service tax
    (2.5%) on outstandin 20 Lacs which is paid after july 2010

    -- So it does not matter that you bought flats before july 2010

    -- VAT 1% is to be paid if your agreement date is later that 1st APRIL
    2010.

    I hope i am right !!!

    Comment

    • #3

      #3

      Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

      Thanks.

      I do think you are right. However, is it also not true that of the balance amount certain payments are exempt from service tax e.g. the payment for the parking space etc? although the builder isnt taking the money as parking space since its against the Sc order, nonetheless he is taking it in some form.So any idea if all of the balance amount is liable for service tax? I think the balance amount in my case was around 25 lacs which is inclusive of society maintenance etc. the deductions are so ambiguous to ascertain exactly what of the agreement value is in actual the balance amount. ..which I understand is liable for tax or is it that ALL of the balance amount irrespective of the break up is liable for tax.

      Also it is a big relief to know that vat will not be applicable to me since I have purchased the flat prior to july 2010.

      Thanks and Regards

      Comment

      • #4

        #4

        Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

        Okay.. This is a good response linked below. Please read the answer to the query posted there.

        It clears a few things. Vat is to be imposed only AFTER Jan 2011.

        Service tax at 2.5% for payments made to builder after July 2010.. which does not include car park and maintenance etc.

        I think this is what the latest is and is a big relief.

        Buyers please keep these links handy for your builders.

        http://www..com/bricks/ask-question-...oy4ilBKo=.html

        Comment

        • #5

          #5

          Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

          the link again:

          http://www..com/bricks/ask-question-...oy4ilBKo=.html

          Comment

          • #6

            #6

            Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

            I think the link is being automatically edited out so am copy pasting the answer:

            From 1 January 2011, the supply of land ancillary to the supply of a new building or part of a new building is subject to VAT under certain conditions. If a building qualifies as a ‘new’ building, it can be sold with 21% VAT (and hence no registration duties will be due). In this respect, a building is considered 'new' for VAT purposes until 31 December of the second year following the year during which the building was first put into use. Under certain conditions, buildings that have been subject to important (transformation) works can also be considered as 'new' for VAT purposes. In case the seller is not a professional building constructor, specific formalities need to be complied with in order for the sale to be subject to VAT (e.g. option to tax). From 1 January 2011, also the supply of land that belongs to a new building or part of a new building is subject to VAT in so far as the supply of the new building itself is subject to VAT. In order for that land to be subject to VAT, three conditions need to be met simultaneously: on the land a building is constructed and supplied with VAT the land and the building to which it belongs are supplied by the same person the land is transferred simultaneously with the building to which it belongs.
            Mark as Abuse | Useful(0) | Not Useful(0)
            Answered by: Salman Latif (Principal Advisor) Posted On : 21/01/2012 - 02:33:04 PM

            Comment

            • #7

              #7

              Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

              Thanks MayankG,

              Just to confirm Service Tax is applicable for underconstruction properties only. If a bldg has OC then the buyer is exempt from Service Tax.

              Vat is applicable regardless, even if you go for a resale in a bldg 8 years old.

              Am I correct in assuming this?

              Originally posted by Mayank G View Post
              I think the link is being automatically edited out so am copy pasting the answer:

              From 1 January 2011, the supply of land ancillary to the supply of a new building or part of a new building is subject to VAT under certain conditions. If a building qualifies as a ‘new’ building, it can be sold with 21% VAT (and hence no registration duties will be due). In this respect, a building is considered 'new' for VAT purposes until 31 December of the second year following the year during which the building was first put into use. Under certain conditions, buildings that have been subject to important (transformation) works can also be considered as 'new' for VAT purposes. In case the seller is not a professional building constructor, specific formalities need to be complied with in order for the sale to be subject to VAT (e.g. option to tax). From 1 January 2011, also the supply of land that belongs to a new building or part of a new building is subject to VAT in so far as the supply of the new building itself is subject to VAT. In order for that land to be subject to VAT, three conditions need to be met simultaneously: on the land a building is constructed and supplied with VAT the land and the building to which it belongs are supplied by the same person the land is transferred simultaneously with the building to which it belongs.
              Mark as Abuse | Useful(0) | Not Useful(0)
              Answered by: Salman Latif (Principal Advisor) Posted On : 21/01/2012 - 02:33:04 PM

              Comment

              • #8

                #8

                Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

                Originally posted by Mayank G View Post
                Okay.. This is a good response linked below. Please read the answer to the query posted there.

                It clears a few things. Vat is to be imposed only AFTER Jan 2011.

                Service tax at 2.5% for payments made to builder after July 2010.. which does not include car park and maintenance etc.

                I think this is what the latest is and is a big relief.

                Buyers please keep these links handy for your builders.

                http://www..com/bricks/ask-question-...oy4ilBKo=.html

                As I mentioned earlier:

                -- VAT 1% is to be paid if Agreement date is on or after 1st APRIL 2010.

                -- SERVICE TAX 2.5% is to be paid against payment made after July 2010 for Under construction flats.

                Comment

                • #9

                  #9

                  Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

                  Originally posted by neptune_2410 View Post
                  As I mentioned earlier:

                  -- VAT 1% is to be paid if Agreement date is on or after 1st APRIL 2010.

                  -- SERVICE TAX 2.5% is to be paid against payment made after July 2010 for Under construction flats.

                  That is right. Hope the legal eagles agree with us too.

                  Comment

                  • #10

                    #10

                    Re : Service Tax and Vat on Flats in MumbaiAccording to latest order by the Hc service tax has been levi

                    Originally posted by KiranS View Post
                    Thanks MayankG,

                    Just to confirm Service Tax is applicable for underconstruction properties only. If a bldg has OC then the buyer is exempt from Service Tax.

                    Vat is applicable regardless, even if you go for a resale in a bldg 8 years old.

                    Am I correct in assuming this?
                    Kiran..your first statement is right. The second I am not too sure. I would think Vat can be charged only of agreements made on new constructions post April 2010.

                    Comment

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